Indorsement served to limit the scope for buyer-side fraud, that is, fraud that would result from a buyer passing on a low-quality or forged debt instrument to a seller.
As with indorsement, this holder-in-due-course feature made negotiable debt more acceptable in exchange.
In particular, while the concept of holder in due course is of limited applicability in modern situations (see for example, Mann 1999, 445-47) the notion of indorsement and the conditional liability that it implies are still relevant.
265) Moreover, the official Rule 30(b)(6) deponent of Countrywide Financial, the largest mortgage lender in the country during the housing bubble, testified in a bankruptcy case that it was customary for the securitization sponsor to remain in possession of the note and for indorsements to be prepared only when necessary for litigating foreclosures.
The indorsement requirement invokes a UCC Article 3 transfer by negotiation.
Similarly, an indorsement pursuant to Article 3 should satisfy that requirement.
This would include an assignee from the holder who for some reason did not become a holder, perhaps because it did not receive a proper indorsement.